Microsoft (MSFT) Bull Recommends Massive Levered Buyback

FBR thinks a levered buyback would be a savvy way for Microsoft’s (MSFT) Steve Ballmer to exploit MSFT’s strong cashflow and credit-worthiness and prove to investors that he does care about the stock price:

We would applaud the announcement of a leveraged buyback as it would: (1) be nicely accretive, (2) improve ROE, (3) provide MSFT the flexibility to execute a larger buyback, while maintaining its ability to be acquisitive, (4) and provide the company with an improved capital structure. The financial impact of a leveraged buyback should improve MSFT’s valuation and affirm management’s faith in the company’s prospects and change the perception that management does not care about its stock price.